SAN FRANCISCO (04/12/2000) - CMGI Inc. announced today that it has launched a $500 million company, CMGion, that it says will help deliver targeted content and software services through a sister company that operates data centers worldwide.
Sun Microsystems Inc. and Novell have each taken small stakes in CMGion and have agreed to help develop the technology platform behind its services. The Internet holding company said CMGion's software will increase the efficiency of companies' servers by using profiling technology. The profiling method will store chunks of data where they are more likely to be used, reducing stress on the main servers. Network computer manufacturer Sun, based in Palo Alto, Calif., and network software firm Novell, which is based in Provo, Utah, each took 4 percent stakes in the company for $20 million.
CMGion will compete against streaming media delivery companies like Akamai, based in Cambridge, Mass.; Sandpiper, based in San Francisco; and Adero, based in Boston. The new company will allow CMGI to integrate more closely the workings of two of its Internet properties - Internet services firm NaviSite and online marketer Engage - in an effort to increase revenues from these two sectors. Engage will provide the profiling technology that would determine where to shift chunks of data from companies' main servers.
NaviSite will provide data centers worldwide that will host CMGion Internet traffic. As the volume of data flowing through CMGion's services grows, Engage will be able to increase the size and richness of its database of Internet activities. "We anticipate being able to reach a significant piece of the online world," David Wetherell, CMGI chairman and CEO, said during a conference call. "What's interesting about this is that it can quickly become the largest source of data on the Internet."
CMGion will spend $200 million to $300 million to build up its own infrastructure of data centers around the world, Wetherell said. In addition to working with NaviSite's data centers, CMGI, based in Andover, Mass., announced today that it has reached a Web-hosting agreement with Level 3 Communications.
This year, NaviSite expects to connect with an additional 36 to 60 hosting sites through partner firms, Wetherell said.
CMGion will release a beta version of its software this summer and intends to go live with the service in January of 2001, Wetherell said. The company will charge clients on a fee-for-service basis and also will license out its software for use. In the future, Wetherell said, CMGI might seek additional outside sources of funding for CMGion and also might spin off additional companies from CMGion. CMGI shares fell $4.75 today, losing 5.7 percent in value, to close at $79.19. NaviSite shares fell $7.56, or 11.2 percent, to $60.
Engage Technologies also finished the day down, losing $2.75 per share, or 7 percent, to end at $36.38.